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China’s Machine Tool Consumer Market and Industrial Outlook

 

 

Dear guests, ladies and gentlemen, good morning!

Welcome to the press conference. On behalf of CMTBA (China Machine Tool & Tool Builders’ Association), let me express my sincere gratitude to you! Three aspects will be mainly introduced here, they are: China’s machine tool & tool market situation, China’s machine tool & tool industrial operation and preparations of CIMT2019 & CCMT2020.

In recent years, China machine tool & tool consumer market has been showing a restorative growth trend, influenced by the rebound of Chinese economy and the pull of new momentum. Thanks to this influence, China’s machine tool & tool industrial operation and the import of related commodities are sharing the same obvious trend. In general, the industry and its consumer market have gradually transformed from the operating characteristic of “overall demand slide and structure rapidly upgrade” before 2015, to “overall demand stabilize and structure rapidly upgrade”. The said characteristic will continue for a period of time. Now, I will comprehensively analyze the current situation and development expectation based on the collative macroeconomic date of China, market information and industrial performance.

 

 

1. Machine Tool & Tool Consumer Market Situation of China

1.1 Recent Chinese macro-economy conditions

Seeing from the y-o-y increase of quarterly GDP, the one of 2017 showed a process of “high at the beginning, low at the end in each quarter”. It was related to the implementation of policy thinking on financial risk control, deleveraging and economic structural adjustment. Influenced by the drop of investment growth in the second half of 2017, the GDP growth in the first half of 2018 showed a slight downturn, with the second quarter relatively obvious, down 0.2% than the 6.9% in 2017 by y-o-y comparison. On July 23, Chinese government put forward specific policies for economic work in the second half of the year. The government determined to better play the role of fiscal and financial policies to support the expansion of domestic demand to adjust structure to promote the economic development of entities, to decide and push effective measures around addressing weak links, strengthening staying power and improving people’s livelihood. These measures include further activating already active financial policy, implementing simultaneous loose-tight prudent monetary policy, expanding the financing and guarantee scale for small and micro enterprises, uncompromisingly eliminating zombie companies, inspiring social vitality, facilitating steady growth of effective investment, etc.. It is expected China’s GDP growth in the second half will pick up and maintain the trend under effective investment growth.

From the perspective of segmentation of GDP in the first half of the year, the tertiary industry remained at top and tended to expand, while the secondary industry closely followed with relatively obvious trend of expansion; for specific industries, industry and manufacturing contributed the most to GDP, with the next one being service industry. The contribution degree of real estate industry decreased somewhat, while the trend of increase. Information and software industry was swift and violent, but its proportion was lower. In summary, in order to achieve stable economic growth in the second half of the year, investment in industry and manufacturing would be increased and consumption demand of machine tool & tool would continue to grow.

Seeing from the growth of investment in fixed assets, it showed a trend of y-o-y consistent drop after March 2017, among which the decline in equipment and tool procurement was fiercer, from y-o-y 10.5% increase in February 2017 down to y-o-y 2.3% increase in Feb. 2018, plummeting by 8.2 percentage points. Under its influence, the demand of machine tool & tool consumer market was falling in the first half of 2018. After March 2018, although the investment growth of the whole society in fixed assets was still in trend of downturn, it was showing rise again respectively at various degree in the fields of the secondary industry, manufacturing and equipment & tool procurement, etc.. Based on a judgement that the investment on the above fields would continue to rise, it is forecasted the investment in relevant consumption fields of machine tool & tool would follow the suit in the second half.

Data of industrial added value showed a month-by-month decline in the first half of 2018 after a significant increase in the fourth quarter of 2017. This echoed to the change of the above investment data. PMI index of China manufacturing industry published by National Bureau of Statistics and caixin.com exposed a structural problem of decline in growth. From the third quarter of 2017 to the first quarter of 2018, the expansion of PMI index by National Bureau of Statistics dropped significantly, while PMI index by caixin.com fluctuated within the weak expansion range, which correlates with the decline in growth in investment. From the first quarter to the second quarter of 2018, PMI index by National Bureau of Statistics showed an apparent rise, but PMI index by caixin.com remained on the edge of the weak expansion range. PMI index by caixin.com mainly reflects the operational tread of Chinese SMEs, so the above disparate indexes are able to reflect the earlier investment in real economy is not enough. Therefore, targeted policies to stabilize economic growth and work arrangements were made by Chinese government.

In the data of money supply, the increase of M0 that correlates with household consumption and real economy was basically stable; the increase of M2 and M1 fell continuously and the excessive growth of social debt has been effectively controlled under the policy of financial risk control and deleveraging. Moreover, since the first quarter of 2018, the growth of M0, M1 and M2 have been steady, benefiting from the simultaneous loose-tight moderate prudent monetary policy initiated by the State Council. A modest rise in the growth of money supply is conductive to promoting consumption and stable investment.

According to the data from National Bureau of Statistics on above-scale industrial enterprise, enterprise asset liability ratio dropped from 56.2% at the beginning of 2017 to 55.5% at the end of the same year. Over the same period, enterprise profit margin of main businesses experienced first drop and then rise, while the deleveraging task of industry enterprises was steadily advancing. In the first half of 2018, the asset liability ratio of above-scale industry enterprise picked up, profit margin of main businesses also increased, and enterprise investment and operation appeared to be the trend of expansion.

In summary, in the second half of 2018, China’s macroeconomic performance would show a stable trend, which would spur an increase of demand for the consumer market of China machine tool & tool.

1.2 The Latest Change in Machine Tool & Tool Market

The following is an analysis from the angle of the change trend of consumer market of China machine tool & tool in the second half of 2018. The fundamental driver of consumption demand for machine tool & tool is the expansion of manufacturing industry. Change in output of related industrial products and the progress of manufacturing technology have an indirect impact on the consumption demand in metal working machine tool, cutting tool and abrasive & grinding tool. The index of consumption demand of China machine tool & tool is formed according to the data of the year 2000 as standard via pertinent analysis and modeling on the data of main industrial products output issued by Bureau of State Statistics. The first index in the index system has four field indexes covering metal cutting machine tool, metal forming machine tool, cutting tool and abrasive. The second index can be subdivided as machining center, turner, grinder, heavy-duty machine tool, presser, puncher, shearer and bending machine, etc.. Below is the upgrade data calculation in June 2018, which has reflected the following recent demand change.

The demand quantity of metal cutting machine tool is influenced by structure upgrade and de-capacity and the demand index in recent years has been falling. 2018 will be a low point in recent consumer demand quantity. With the advent of the renewal period of machine tools in service and new kinetic energy, the demand index will show a steady upward trend after 2019.

In addition, due to the obvious demand structural upgrading, the average price of metal cutting machine tool has soared sharply in the last decade. The quick rise of value of future machine tool would hedge the impact on expenditure caused by the decrease of demand quantity. The expenditure of metal cutting machine tool would show a steady growth trend in China.

Metal forming machine tools differentiate from metal cutting ones with comparatively more visible increase. This benefited from the close tie between user market and consumption of metal forming machine tools. The constantly improving contribution rate of consumption to Chinese economy is indirectly helping the growth in consumption of metal forming machine tools. What similar to metal cutting machine tools is the quick growing expenditure on metal forming machine tool becoming more remarkable with the lift of value of machine tool.

There is a stable overall demand in cutting tools since 2018. This correlates with the steady demand in metal cutting machine tools. At the same time, the upgrade in performance and the smooth increase in processing capacity are offset each other. It is expected demand in cutting tools in the future would show a trend of “overall demand stabilizes, structure upgrades”. The market competition will become fiercer by time.

With domestic manufacturing improvement and increase in demand in precision processing, especially with the rise in demand in grinding machine tools, the consumption in abrasives will show a gradual step-up in 2018. Due to the upgrade in consumption and demand structure, the supply structure of abrasives will follow the suit.

In addition, investment trend from user fields is the most direct reference on judging the trend change and hot direction of the future domestic consumption of machine tool & tool. For your reference, the following is the latest trend change in investment from user fields including automotive, aerospace & aviation, national defense, shipping and ocean engineering, energy equipment, rail and transit, engineering machinery, steel, automotive parts, machine tool & tool, etc., based on the analysis on the quarterly data in the first half of 2018 of listed companies (282 companies) in china’s shanghai and Shenzhen stock markets.

 

2. China Machine Tool & Tool Industry Operation

2.1 Overall Operation of machine tool & tool industry

According to the calculation of relevant data by the National Bureau of Statistics, the output of metal working machine tool is USD 13.5 billion in the first half of 2018 in China, increasing 11.5% over last year. Among them, metal cutting machine tool is around USD 750 million, a y-o-y up 13.6%, while metal forming machine tool is USD 600 million, a y-o-y growing of 8.9%. Based on the above data, China’s machine tool & tool consumer market showed an obvious increase in the first half of 2018.

2.2 New Features in Industry Development

China’s machine tool & tool industry is experiencing unprecedented battle in transformation. Under the impact of various factors from both home and abroad, China’s machine tool & tool industry is showing new features.

·Total quantity towards stability, structure upgrade. In the future, China machine tool & tool industry will be transformed from mode of scale oriented to development mode of quality and profit oriented. Under the premise of maintaining industry generally stable, resources will lean towards the cluster of enterprises with higher operation efficiency, better operation quality, more advanced product technology and greater potential for development. Marketization mechanism becomes the primary mean to the allocation of the above resources.

·Innovative driver becomes the engine of transformation and upgrade of the industry. Factor driven model will gradually recede to a secondary position. Innovative driving mechanism will become the primary driver for the development of the industry. “Science and technology are the primary productive force” will be given a new connotation and play a new historic role.

·Deepen the reform and opening up, shape new competition and cooperation relationship. Under the new circumstance, deepening domestic reform and opening up policy have positive significance to the development of machine tool industry. Deepening reform in the aspects of state owned enterprise, the construction of innovative system, investment, financing, taxation and allocation regulation, etc. will prompt collaborative development of domestic enterprises with different ownership, and lay a solid foundation for industrial development. Policies of opening up, such as optimization of structure of introducing foreign capital, promotion of fair competition, protection of IPR, consolidation of international cooperation, equalization of market access to promote trade and investment equity will form positive interaction between domestic and overseas enterprises.

 

3. Expectations for the Future

In consideration of the comprehensive influence of industrial operation, import and export trade, change in RMB exchange rate, etc., a sharp growth would be expected on China’s machine tool & tool consumer market in 2018. Among them, output of machine tool & tool remains the state of slight increase. Industrial internal structural upgrade will become more significant, and import of machine tool & tool will share the trend.

 

4. CIMT2019 & CCMT2020

Now, let you have the general information on the preparatory work of CIMT2019 and CCMT2020 hosted by CMTBA. Under the impact of constant upgrade in consumption and demand on China machine tool & tool market, the two sister exhibitions of machine tool & tool industry are growing more influential. The two shows have become renowned branded ones in China’s and even in the world’s machine tool & tool industry, judging on the facet of exhibition performance, scale, degree of professionalism, internationalism, and attraction. The sixteenth China International Machine Tool Show (CIMT2019) will be held on April 15-20, 2019 at China International Expo Center (New Venue) Beijing. It is expected the total area of the exhibition will reach 140 thousand square meters, among which overseas exhibition area will be 70 thousand square meters. The theme of the exhibition is set as “Win the Smart Future Together”. The theme conforms to the development concept and trend of Chinese market, industry and international peers, fit the current situation, and respond to the hotspots in industrial development. CMTBA will continue to uphold the concept of holding exhibition as a platform for economic and trade exchange in the field of machine tool & tool at home and abroad, to provide optimized service for every exhibitor and visitor. I believe with the support of industrial and other peers, CIMT2019 is bound to become a feast for machine tool industry.

CMTBA will hold the eleventh China CNC Machine Tool Fair (CCMT2020) at Shanghai New International Expo Center from April 7-11, 2020. The exhibition will be hosted by CMTBA and abroad, to provide optimized service for every exhibitor and visitor. I believe with the support of industrial and other peers, CIMT2019 is bound to become a feast for machine tool industry.

CMTBA will hold the eleventh China CNC Machine Tool Fair (CCMT2020) at Shanghai New International Expo Center from April 7-11, 2020. The exhibition will be hosted by CMTBA and is a sister exhibition of CIMT. With the expansion of opening up of China machine tool consumer market, CCMT2020 will be more internationalized and enjoy rising global impact. We expect CCMT2020 to become another showcase for Chinese machine tool & tool industry.

Finally, let me show my sincere thanks to every guest and friend in the press conference again. Welcome to visit CIMT2019 and CCMT2020, welcome to invest, work and visit China. As always, CMTBA will help you in doing business in China. Wish everyone smooth work and good health. Thank you!

 

 

CMTBA

Sep. 12, 2018


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